What’s happening in the US?
On the US side, greenwashing claims have been targeted within varying agencies of the federal government, including the Securities and Exchange Commission (SEC). In March 2022, the SEC announced a Climate and ESG Enforcement Task Force, geared towards tackling misconduct with reference to greenwashing for disclosures of climate risks and compliance for investment approaches and publicly-traded companies. During this time, a rule was developed requiring companies to include climate-related disclosure information, including for greenhouse gas emissions. A subsequent rule determined that terminology in claims must also be consistent with its regarded focus area. By September 2023, the rule was adopted to ensure that 80% of a fund’s portfolio (the “name”) matches what is being advertised. This specifically can target misleading claims by companies that are claiming that their products are green.
The US Commodity Futures Trading Commission (CFTC) has proposed guidance regarding the listing of voluntary carbon credit derivative contracts, oriented toward futures contracts, derivatives markets, and spot markets (i.e. voluntary carbon credits). In mid-2023, they also established a task force against environmental fraud in spot markets, including benefits of carbon credits purchased and potential misrepresentations. At the state level, California’s Assembly Bill 1305 (“Voluntary Carbon Market Disclosures Business Regulation Act”), now into law as of 2024, is designed to mandate that businesses selling or marketing voluntary carbon credits within California must disclose specific information about associated carbon offset projects. This is in regard to accountability measures and projected emissions reductions towards ‘net zero’ emissions. The sector will continue to monitor how this may impact carbon removal credits down the line and it continues to pose the importance of federal (or state) regulation in this space.
The carbon removal ecosystem is actively working to advance monitoring, reporting and verification (MRV), which has been described as “the receipts” for carbon removal, and which can help grow transparency in the market.
